Truist Financial has joined a handful of regional banks that have issued an initial assessment of the risks and opportunities in a warming world.
For example, about 14% of its residential real estate mortgage portfolio is at some flood risk and 24% is at hurricane risk, the Charlotte, North Carolina company said in a 28-page report released this week. Truist also said that 14% of its commercial property portfolio was at risk of flooding, while 19% was at some level of hurricane risk.
Its accounting followed the guidelines of the Task Force on Climate-related Financial Disclosures, a framework that is likely to become familiar as bankers think about how to deal with new regulatory expectations regarding climate risk.
In a foreword, CEO Bill Rogers described the report as "a fundamental step in addressing the complex issues surrounding climate change," and outlined some of the missions for the $ 522 billion Truist.
"Extreme weather events can damage assets and disrupt operations and supply chains, creating significant physical risks for Truist and our customers," he said. "At the same time, new policies, technologies, and changes in consumer demand associated with climate change pose transitional risks that can potentially transform the size and nature of global, regional, and local economies and the financial markets that support them."
The big Wall Street banks have already released their own TCFD reports, but climate disclosures are still in their infancy at major regional banks. In June, Regions Financial, with assets of $ 156 billion in Birmingham, Alabama, released its first TCFD report, and PNC Financial Services Group, with assets of $ 553 billion in Pittsburgh, released its first TCFD in August -Report.
The industry has been driven in this direction by a number of factors, including increased shareholder pressures and growing regulatory expectations. The Office of the Comptroller of the Currency recently released a draft of its Regulatory Principles for Climate Risk, which sets standards for how banks with assets over $ 100 billion should incorporate climate into areas such as risk management and strategic planning . Earlier this year, the Securities and Exchange Commission asked for public opinion on a new climate risk reporting framework that favored the TCFD's column.
Truist also announced that approximately 12% of its commercial and industrial loan portfolio – focused on oil and gas, auto and power generation – is at high risk in moving to a low-carbon. suffer financial losses economy. Known as transitional risk, risk is one of two types of risk that banks should generally consider when considering potential losses from climate change.
The other type is the physical risk or the risk of financial loss due to severe weather events such as forest fires or cyclones. In a physical risk example, Truist shared that it had net losses of $ 10.3 million between 2015 and 2020 from physical damage to its own facilities.